Breaking News
More () »

Why Social Security's big boost has some downsides

The increased income from the Social Security adjustment can also negatively impact those receiving low-income assistance for Medicare costs.

CALIFORNIA, USA — The Social Security Administration announced the biggest boost to benefits in four decades. It means millions of Social Security recipients will get a nearly 9% increase starting in January.

While it's more money in people's pockets, there are some potential drawbacks to know.

"As much as this is money coming into your pocket that maybe wasn't expected, there's been a heck of a lot of money going out of your pocket," said Joseph Eschleman, Certified Investment Management Analyst and president of Towerpoint Wealth. 

That's because of record inflation, which is a big worry for everyone - like retirees on a fixed income. 

As a result, the Social Security Administration announced an unusually large cost-of-living adjustment of 8.7%. 

"Use this as an opportunity to sock a little more money away in your savings in your rainy day account," Eschleman said. 

The cost-of-living adjustment means the average recipient will get more than $140 extra per month. However, the boost could cost people in other places.

"Depending on if you may be a beneficiary of Medi-Cal or Covered California, those benefit programs actually have some income ceilings where if you make too much in income you no longer qualify for those programs,"  Eschleman said.

The increased income from the Social Security adjustment can also negatively impact those receiving low-income assistance for Medicare costs, as they could be subject to trims in the amount of assistance they receive through Medicare Savings programs or Medicare Extra Help or Medicaid.

Increased incomes due to the cost-of-living adjustment can also make older and disabled beneficiaries ineligible for the level of benefits they currently receive when their income exceeds the limits.

Eschleman advised people to plan around this boosted benefit, and recognize that Social Security is just one component of solid retirement income planning strategy.

"Social Security was never designed to be the cure all, end all for retirement income,"  Eschleman said. 

"It (the increase) also opens up the opportunity for breathing room, you can let one notch out on the belt in terms of not being so economically strapped," he added.

While 2023 marks a record high boost to Social Security, Eschleman said people should be prepared for future years where increases aren't as high, such as when inflation hopefully goes down.

To gauge just how much more money you may actually see in 2023, take your net Social Security benefit, add back in your Medicare premium and multiply that by the 2023 cost-of-living Adjustment.


California Middle Class Tax Refund | Who gets the California inflation relief check?

Before You Leave, Check This Out